EUROPE IS MOVING TO COMPREHENSIVELY IMPROVE ITS RELATIONS WITH China.(Note
1) This was signalled on July 5, 1995, when European Trade Commissioner
Sir Leon Brittain unveiled the European Union's new initiative, A Long-Term
Policy for China-Europe Relations. The China initiative follows the EU's Towards
a New Asia Strategy, published in July 1994, and parallels Japan and Korea initiatives
(also published in 1995). The new China policy professes to put the EU's relationship
with the People's Republic of China into a "single integrated framework,"
while seeking to integrate China "in a responsible and constructive"
manner into world affairs across a broad range of issues. It declares that "Europe's
relations with China are bound to be a cornerstone in Europe's external relations,
both with Asia and globally."(Note 2) It takes
as its point of departure the "rise of China as unmatched amongst national
experiences since the Second World War,"(Note
3) and makes much of the implications of China's rapid economic growth and
reform programs. The initiative (as detailed in the document) is strong on commerce,
but places noticeably less emphasis on political, diplomatic, or strategic matters.(Note
4) While concentrating on China's economic growth and the potential European
trade and investment opportunities, the document also discusses the issues of
human rights and the rule of law, Hong Kong and Macao, the environment, social
welfare and human resource development, scientific and technical cooperation,
and information and scholarly exchanges. The initiative sets forth a strategy
of "constructive engagement" (a term borrowed from American China
policy) for integrating China into a variety of IGOs, with particular attention
paid to the conditions under which China will be admitted to the World Trade
Organization (WTO). The initiative proposes a number of concrete steps to be
taken in the aforementioned areas to improve EU-PRC cooperation and China's
adherence to international standards and behavioral norms.(Note
5)

The EU initiative on China is a welcome step forward in awakening dormant
European attention to the commercial opportunities in the PRC. To date, Europe
has lagged substantially behind North America, Australia, and other Asian states
in investing and trading with China. This reflects not just the occidental orientation
of European business, but more generally the low level of understanding of Asia
in Europe. The EU recognizes this deeper problem of awareness and expertise,
and the China initiative contains the intention to foster increased study and
understanding of Chinese affairs across Europe as well as to augment European
studies in China.(Note 6)

The EU initiative on China is also notable for its cooperative tone and long-term
perspective. It stands in marked contrast to the more confrontational approach
toward China and Asia adopted by the United States,(Note
7) while the initiative coincidentally came precisely at the time of sharp
deterioration in Sino-American relations.(Note 8)
The Chinese and international media were fast to pick up on this contradistinction,
although the timing was coincidental.(Note 9)

CONTEMPORARY SINO-EUROPEAN RELATIONS IN HISTORICAL CONTEXT
For the first time in 50 years, Sino-European relations are developing an independent dynamic of their own. Previously, the PRC's relations with Europe, and vice versa, were derivative of the Cold War and broader relations with the superpowers. With the end of the Cold War and fluidity in international relationships, space and scope have been created for Europe and China to establish new and productive relationships.

Past relations between China and Europe have by no means been trouble free,
and it would be a mistake to presume or predict that future relations will flow
smoothly as a result of the new EU China initiative.(Note
10) It is a complex relationship not only between the EU and China, but
above all among the 15 individual member states, and it is one that remains
in its early developmental stages. Disturbances can also be expected as a result
both of domestic political changes in China (particularly if there is another
Tiananmen-style suppression of popular protest), and broader Western concerns
about Chinese domestic and international behavior. European states share in
common similar values and concerns with their G-7 partners, Australia and others.
While it is unrealistic to expect the G-7 to foster or follow a coordinated
China policy, there is much scope for reinforcement of policies carried out
by individual member states.(Note 11) It must
also be remembered that the EU China initiative is in no way a replacement for
bilateral relationships and policies of member states, but rather should be
seen as a supplement and framework for individual national policies.

China's relations with foreign countries have historically been prone to disillusion
and fallout as a result of exaggerated expectations and misperceptions on both
sides.(Note 12) Without an adequate understanding
of the past patterns of Sino-European interactions and a sober sense of the
potentialities and limits of cooperation, the newborn Sino-European relationship
may also fall prone to disenchantment and recrimination.

Prior to 1992 both Eastern and Western Europe held a derivative position in Chinese foreign policy. That is, Beijing's relations with Europe were principally derived from and dictated by its relations with the two superpowers. Whether as a function of Chairman Mao's postwar two-camp worldview, the Sino-Soviet and Sino-American estrangements, Mao's theory of the three worlds, or Deng Xiaoping's polycentric diplomacy, Europe's position in Chinese foreign policy was largely determined by Beijing's relations with Washington and Moscow.

Relations with European states were thus not generally viewed by China as
necessarily worthy pursuits in their own right, but rather as adjuncts to China's
relations with the two superpowers. To the extent that Beijing sought relations
with Western European states, they were largely pursued as a means to exploit
fissures in their relations with the United States-a latter-day version of "using
the barbarians to control the barbarians" (yi yi zhi yi).(Note
13) After the first decade of Sino-Soviet solidarity, the same can be said
of Beijing's approaches to Eastern Europe. In both cases, relations with European
nations could be used to strategic advantage in China's larger difficulties
with the Soviet Union and United States. During the 1970s and early 1980s, following
the rapprochement with the United States, China's policy changed from one of
promoting division to strengthening unity. A "united front" against
Soviet "social imperialism" was the order of the day. Beijing thus
became a vociferous advocate of a united Western Europe and NATO alliance against
the Soviet "polar bear" (beiji xiong). China was dubbed by
some as the "16th member of NATO." Still, throughout this period China's
relations with the superpowers were the defining variable in calculating Beijing's
relations with Eastern and Western Europe.

Since 1992, however, China's bilateral relations with European countries have demonstrated growing independent dynamics. An analogy may be that of a forced marriage arranged by two sets of parents (the former Soviet Union and United States), whereby after the marriage (and the divorce of the parents) the newlyweds begin to really know each other, discover their commonalties and differences, and build an independent relationship.

To a large extent, the same can be said of the historical place of China in
Europe's postwar foreign relations. Few European states were willing to pursue
relations with Beijing independent of Washington and Moscow (the Scandinavian
countries, Albania, and later France being the exceptions). But, generally speaking,
the more important feature of European's China policy was neglect. There was
a clear absence of priority placed on deepening relations with the PRC. William
Griffith once characterized this neglect of China in Western European thinking
as being "weak and far away."(Note 14)
Of course, this general neglect was pursued within the context of the Cold War
and Washington's trade and strategic embargo on China. America's Western European
allies cooperated in the efforts of COCOM (the Coordinating Committee for the
control of strategic exports to Communist countries, based in Paris) to embargo
high technology sales and transfers to the PRC,(Note
15) even if some nonstrategic trade did take place.

This historical pattern of interaction between China and Europe was not only
reductionist (i.e., derivative of relations with the superpowers) but also ambivalent.
Much like historical relations between the United States and China, an ambivalence
was evident in mutual images and relations. Europe served as a source of emulation
and stimulus to modern China's development, but it had also been a source of
imperial encroachment and destabilization.(Note 16)
On balance, China witnessed a flowering of relations with both Eastern and Western
Europe during the 1980s. As it was poised to further consolidate these ties,
the momentous events of 1989-in both China and Europe-erupted.

CHINA AND EUROPE SINCE TIANANMEN

The events of June 4, 1989, had considerable fallout on Sino-Western European relations. Like Americans, Europeans were riveted by the events unfolding in Beijing and other cities across China during April and May 1989, only to witness the horrors of the military crackdown in early June. Individual Western European governments quickly enacted sanctions that paralleled those of the United States, although cultural exchanges were not officially suspended as was the case with the United States.

At the European Community's summit meeting in Madrid on June 27, 1989, Community leaders discussed what united steps to take against China. They agreed to impose tough economic sanctions individually and collectively via the Community, suspend all military contacts and arms sales, withhold all ministerial-level official visits to China and defer those already scheduled, freeze all government-guaranteed loans, and issue a sharply worded statement condemning the Beijing bloodbath. Member governments also extended visas for 10,000-odd Chinese students who sought not to return to China under current conditions. Even the European Commission, normally reticent to cast political judgments, issued a statement expressing its "consternation" and "shock" at the "brutal repression." The Commission also cancelled the pending visit to Brussels of Foreign Trade Minister Zheng Tuobin. These sanctions, though, were never intended to inhibit European businesses from continuing their projects or starting new ones in China. Western European governments were also careful to ensure that cultural and academic exchanges not be ruptured.

The French Government gave sanctuary and political asylum to numerous Chinese involved in the prodemocracy movement. Among these were several notable dissidents and movement leaders, such as political scientist Yan Jiaqi, economic reformer Chen Yizi, playwright Su Xiaokang, student leader Wuer Kaixi, and entrepreneur Wan Runnan. The presence of these dissidents in Paris caused severe strain in Sino-French relations, particularly after the French Government permitted them a prominent place in the centenary parade on Bastille Day.

Tiananmen also caused particular problems for the British Government. With 1997 drawing ever closer, London and Beijing were involved in sensitive negotiations over the content of the Hong Kong Basic Law and other important details related to the retrocession of the colony to Chinese sovereignty. Tiananmen had a major impact in Hong Kong, bringing hundreds of thousands of demonstrators into the streets for unprecedented demonstrations. The brain drain and general exodus of professionals from Hong Kong had been serious prior to June 4, but it accelerated sharply thereafter. The British and other Western governments were pressed even harder to formulate immigration plans to absorb those who were voting with their feet. While Australia, Canada, the United States, and some Scandinavian countries offered to accept larger numbers, the ultimate burden fell on London to formulate a credible immigration package that would provide a "right of abode" while still encouraging Hong Kong residents to stay in the territory through 1997.

In December 1989, after months of debate inside and outside the House of Commons, Britain passed a special amendment to the 1981 Nationality Act that promised British passports to 50,000 heads of Hong Kong households (thus to include families, bringing the total figure potentially to as many as 250,000). China's response was to "firmly oppose" the granting of the right of abode for Hong Kong citizens, but there was little Beijing could do about it at the time.

During 1990, however, Beijing noticeably increased its pressure on the Hong Kong Government. Political hardliner Zhou Nan was assigned to head up Xinhua News Agency in Hong Kong-the de facto PRC government representative-and Lu Ping, another arch conservative, was appointed head of the State Council's Hong Kong and Macao Affairs Office. Premier Li Peng and Vice Premier Wu Xueqian both made tough statements concerning the colony during the year.

The Hong Kong issue became still more contentious when, in 1992, new Governor Chris Patten unveiled plans to substantially broaden the political enfranchisement of Hong Kong citizens in voting for their representatives in the Legislative Council (LegCo). Beijing was furious. Thereafter ensued a year and 17 rounds of tense negotiations between London and Beijing concerning Patten's package, only for them to be abandoned without compromise or resolution. Patten pressed ahead with his planned reforms, while Beijing announced it would scrap LegCo on its first day of sovereignty. In its stead Beijing set up a Parliamentary Working Committee (PWC) composed of many pro-Beijing Hong Kong citizens, which would help guide the transition and serve as a rudimentary legislative body. A stalemate ensued, with considerable harsh invective hurled against Governor Patten by Beijing's propaganda organs. Major issues such as plans to build a new $16.3 billion airport and a modern new container terminal were put on hold as Beijing refused to negotiate, as were critical transitional issues related to the Hong Kong Civil Service, Court of Final Appeal, and expatriates working in the territory. Finally, after 3 years of stalemate, these issues were resolved within the Joint Liaison Group (JLG) in 1995. While Beijing refused to deal directly with Governor Patten directly and plans to dismantle LegCo in 1997, it came to agreement with London on these key issues concerning Hong Kong's future. Numerous other issues remain unresolved, but a more pragmatic line seems to emerged from Beijing in the immediate run-up to the July 1, 1997, handover. There is evidence that the shift in tenor and substance emerged following a high-level Politburo meeting in March 1995, at which Chinese leaders decided that it was in China's interests to resolve outstanding issues rather than shelve them.

Most of the Western European sanctions on China resulting from Tiananmen were
lifted during the summer of 1990.(Note 17) Following
the Group of Seven (G-7) summit and U.S. President Bush's indication that the
United States "would not oppose" the allies' lifting sanctions, Western
European governments moved to slowly reinitiate ministerial contacts and government-backed
loans. Arms sales and military contacts remained frozen (the latter was lifted
in 1994), but ministerial and head-of-state visits resumed.

For China's part, Beijing was far less vociferous in its condemnation of Western
European than of American sanctions, although it did blame European sanctions
and post-Tiananmen nontariff trade barriers for a sharp reduction in two-way
trade for 1990.(Note 18) Nor did Beijing particularly
blame Western European governments, as it does the United States, for trying
to undermine the Chinese regime via a strategy of "peaceful evolution"
(heping yanbian).

Sino-Western European relations have always reflected a more businesslike and pragmatic pursuit of bilateral interests than the often emotionally charged state of Sino-American relations. One possible reason for this is that Europeans do not exhibit the same missionary complex about remolding China that many Americans do. Nonetheless, politics-exiled Chinese dissidents in particular- became important items on the Sino-European diplomatic agenda following Tiananmen. Beijing made its displeasure known to France for the granting of political asylum and permitting Chinese dissidents to locate the headquarters of the Federation for a Democratic China in Paris. In December 1990, China and Sweden became involved in a rare dispute that resulted in the mutual expulsion of diplomats-the first foreign diplomats to be expelled from Sweden since some Soviets in 1976. The catalyst was a Swedish accusation that Chinese diplomats were monitoring and harassing Chinese students in Sweden, a charge that was substantiated in several Western European capitals. During the 1989 demonstrations in Western European capitals before and after June 4, Chinese diplomats frequently filmed demonstrators and attempted to intimidate the Chinese students among them. Since Tiananmen, innumerable undercover agents have been sent abroad as students in order to monitor dissident activities and set up party cells in the overseas student community.

Eastern Europe's reaction to Tiananmen varied. The Polish, Hungarian, and
Yugoslav Governments made public statements condemning the use of force but
did not impose any sanctions against China. The reactionary regimes of Bulgaria,
Czechoslovakia, East Germany, and Romania made their approval known to China
and restricted news of the massacre domestically.(Note
19)

Throughout the fall of 1989, as East European Communist regimes were coming under increasing pressure, China dispatched several officials to consult with the governments of East Germany, Bulgaria, and Romania. No doubt these emissaries imparted their recent experience and counsel to their East European comrades. Politburo member Yao Yilin visited Erich Honecker within a fortnight of his overthrow. Honecker's order to use force to suppress demonstrations (which he described as the "Chinese solution") was disobeyed by key generals and the Stasi. Politburo member and internal security czar Qiao Shi similarly visited Bucharest to consult with Ceausescu shortly before his overthrow and execution.

The reaction of the post-Tiananmen Chinese Government to the democratic upheavals
in Eastern Europe during the autumn of 1989 and winter of 1990 was one of shock.
As one Communist regime after another was overthrown, the Chinese leadership
looked on in horror. While the Chinese government refrained from commenting
publicly on these momentous events at the time, internal Communist Party documents
blamed Mikhail Gorbachev for permitting them.(Note
20)

There is evidence that the Romanian case had a particularly devastating effect on the Chinese leadership, not only because Ceausescu had been an ally of longstanding, but particularly because of the defection of parts of the Romanian army and security apparat. Following Ceausescu's execution, China's leaders convened emergency meetings, tightened martial law in Beijing and placed the army on high alert for fear of a repeat performance in the Chinese capital.

The democratic revolutions in Eastern Europe and the reunification of Germany, not to mention the problems gripping the Soviet Union, left the Chinese leadership in a paranoid state, isolated in the rapidly shrinking socialist world and fearful of the future. China took pains to maintain state-to-state relations with the new regimes in Eastern Europe, recognizing them immediately and refraining from public comment about their character, but China's role in the region became more marginalized as Communist parties fell from power one after another.

China made a point of establishing diplomatic relations with the new regimes
in Eastern Europe, and generally speaking, relations subsequently resumed. Eastern
Europe offers an market for Chinese-produced consumer goods, and as a result
trade has increased. The most recent official figures represent total trade
volume of $2.6 billion in 1992,(Note 21) but it
probably does not exceed $5 billion at present because of the lack of hard currency
in East European countries. Since 1991 many Chinese citizens have emigrated
illegally to Eastern Europe to trade and start up businesses (by no means all
of it legal). There are now said to be as many Chinese restaurants in Prague
and Budapest as in Paris and London!

SINO-EUROPEAN RELATIONS IN THE MID-1990S
By the mid-1990s, China's relations with European countries had in most cases
normalized. With the exception of the continuing ban on weapons sales and defense
technologies to China, all post-Tiananmen sanctions were lifted by 1994.(Note
22) Sino-British and Sino-French relations continued to have their problems
in the early 1990s but subsequently improved. The principal impediment in Sino-Anglo
relations were the problems related to Hong Kong just noted, but with the resolution
of some contentious issues in June 1995 and Chinese Foreign Minister Qian Qichen's
official visit to London in October 1995, pragmatism began to prevail as the
retrocession drew near.

In the French case, tensions over the harboring of dissidents were compounded
in 1992 when France decided to sell 60 Mirage-2000 fighter-interceptors to Taiwan
(a deal worth $3.8 billion). This followed the $4.8 billion 1990 sale of 16
LaFayette frigate hulls to the Taiwanese navy. Beijing reacted harshly in word
and deed. It condemned Mitterand's "short-sighted Socialist government"
for "forgetting principles for the sake of interest" and "violating
the principles which were highly respected by all French governments since that
of Charles de Gaulle."(Note 23) Beijing then
announced that it was closing the French Consulate General in Guangzhou and
barring French companies from bidding for the contract to build the subway system
in the same city. In March 1994 relations were further strained by the sale
to Taiwan of $2.6 billion more in advanced weaponry, including Exocet, Crotale,
and Mistral missiles, torpedos, rapid-fire canons, antisubmarine sensors, and
electronic warfare equipment. Subsequently, the new Balladur government (and
particularly his Foreign Minister Alain JuppJ) decided to try and arrest the
downward spiral in relations. In January 1994, following intense behind-the-scenes
negotiations, Foreign Minister JuppJ publicly reaffirmed China's "sole
and inalienable sovereignty over Taiwan" and committed the French Government
to no further arms sales to the island. With these statements and commitments,
the way was cleared for a resumption of relations, the reopening of the Guangzhou
consulate, and a state visit by then President Edouard Balladur to China in
spring 1994. The visit and resumption of ties were clouded, however, by closed-door
disagreements between Balladur and Premier Li Peng over China's human rights
policy. Also, when visiting Shanghai, Balladur met with known dissidents, thus
irritating his hosts. Still, Beijing deemed that Sino-French relations were
sufficiently back on track so as to send President and Chinese Communist Party
General Secretary Jiang Zemin on a state visit in September 1994. Jiang's visit,
in which he was accompanied by Foreign Trade Minister Wu Yi, netted French companies
$170 million in contracts and $2.5 billion in letters of intent.

It is unclear what, if any, alterations in Sino-French relations will result from the defeat of Balladur and election of President Chirac. The most telling sign may be that JuppJ, who was the key figure in normalizing relations after the Mirage sale, is the new Prime Minister. France has considerable commercial interests in China, doing $5.7 billion in two-way trade in 1994. However, despite the 1994 arms agreement between Paris and Beijing, the issuehas not been resolved. France has interpreted the agreement to mean that no offensive arms would be sold to Taipei, whereas China interprets the agreement to ban all arms sales. Several weapons systems that can be interpreted as defensive are reportedly in the pipeline. Such sales would no doubt provoke a strong reaction from Beijing and risk another rupture in ties.

China's relations with other Western European countries and the EU appear
to be improving as well. China's relations with Germany are particularly strong.
Chancellor Kohl and Prime Minister Li Peng exchanged visits in 1994, while Kohl
and Chinese President Jiang Zemin exchanged state visits in 1995. Bilateral
Sino-German trade topped $10 billion in 1993 (Note
24) and reached $16.7 billion in 1994.(Note 25)
Siemans AG won the $414 million contract to build the Guangzhou subway while
other German firms are involved in a wide range of infrastructure and industrial
projects. In July 1995 Mercedes-Benz was awarded a $1 billion project to build
passenger cars in China, winning the coveted and competitive bid from U.S. auto
manufacturers. Chancellor Kohl has publicly proclaimed that Germany and China
enjoy a "special relationship."

Germany's commercial emphasis has drawn criticism domestically, with critics (particularly from the Social Democratic Party) accusing the Kohl government of neglecting human rights in favor of a mercantilist China policy. This was highlighted in the wake of the sentencing of leading Chinese dissident Wei Jingsheng in 1995 to 14 years in prison for sedition-shortly after Chancellor Kohl made his third visit in a little more than a year to China.

Since the lifting of post-Tiananmen sanctions and the dawn of the post-Communist
era in Eastern Europe, commerce has taken priority in Europe's relations with
the PRC. Overall, China's trade with the EU nations has been rapidly escalating
since 1992. However, as is the case in US-China trade, China runs a trade surplus
with the EU (although not nearly as large as with the United States). In 1994,
according to EU statistics, total trade between the PRC and EU member states
totaled ECU 35.4 billion or $46 billion.(Note 26)
The EU ran an overall deficit of ECU 10.5 billion or $13.6 billion, and no member
state ran a trade surplus with China. As table 1 indicates, four EU countries
dominate the Community's trade and investment with China: Germany, the United
Kingdom, France, and Italy. Germany trades the most, more than twice as much
as any other. There is, however, greater parity in foreign direct investment
(FDI) figures.

While EU member states lag behind the United States, Japan, and others in
both trade and investment with China, the trendline since 1992 has been very
positive. Before 1992 the EU invested less than $1 billion annually in China,
while bilateral trade hovered around the $10 billion mark; since 1992 both categories
have trebled. Still, in 1994 the EU had only a 9 percent share of China's total
foreign trade (down from 15.7 percent in 1986) and a 4 percent share of total
FDI in China. Most American and Japanese companies invest more in a year in
China than the EU has in total since 1979! Over the period 1979-1994, the 15
EU member states have invested in only 3,000 projects in China, signing contracts
worth a total of $7.3 billion (with actualized FDI worth only $2.5 billion).(Note
27) Nonetheless, in recent years European business does seem to have finally
discovered the China market, although European companies do not seem as competitive
as their counterparts. Today the EU ranks as China's fourth-largest overall
export market and supplier (behind Hong Kong, Taiwan, Japan and the United States).

While the increases of recent years are positive, as European Trade Commissioner
Sir Leon Brittain has noted, European business must accelerate its efforts to
understand the China market and establish a presence there.(Note
28) To become more competitive, European business must establish a stronger
physical presence in China and hire employees trained in Chinese language and
studies. There is, at present, a dearth of such expertise among university graduates
in Europe, but this need represents an area of potential corporate funding for
higher education across the European Community.

There have been some encouraging trends since 1993 in new funding and initiatives to support Asian studies in Europe, such as the establishment of the International Institute of Asian Studies in the Netherlands, the European Science Foundation's Asian Studies initiative, the Pacific Asia Program of the Economic and Social Research Council (UK), and potentially the creation of the European China 2000 Network as an outgrowth of the EU's new China initiative. These are important initiatives that may serve to arrest the eroding base of academic expertise on Asia and China in Europe, but considerable and sustained vision and funding is required if Chinese and Asian studies in Europe will ever approach the levels of North America, Japan, or Australia. It also requires institutional and individual commitment across the continent, not only to build up Chinese studies in Europe but to increase educational and cultural exchanges with China. In 1994 there were an estimated 40,000 Chinese students studying in Europe, 80 percent sponsored by the Chinese Government. By contrast, there were fewer than 1,000 European students studying in China. Europe needs an across-the-board strategy and substantial funding for training students and advanced expertise on contemporary China.

Trade between China and the EU is governed by a Trade & Cooperation Agreement,
entered into in 1985. The European Commission and China also use the forum of
the China-EC Joint Committee (CECJC) to review a variety of cooperative programs.
The EU assists China by sponsoring training programs to develop Chinese expertise
in the areas of the environment, law, management, industry, economics, and telecommunications.(Note
29) In November 1994 the China-Europe International Business School (CEIBS)
opened in Shanghai. A followon to the highly successful 10 years of experience
of the China-Europe Management Institute, the CEIBS is a joint educational venture
between Shanghai's Jiaotong University and the European Foundation for Management
Development (a consortium of high-level European business schools and companies).
It will train senior executives and middle-level managers in a 2-year part-time
course, and grant an MBA to its younger graduates. The sponsors have already
raised $30 million for this unique venture.(Note 30)
Official development assistance (ODA) is also channeled to China via the European
Commission as well as by individual member states. The EU and PRC also cooperate
in various law enforcement matters via Interpol.

Trade and investment matters are monitored via specialized joint committees,
under the Trade & Cooperation Agreement. The Joint Working Group on Economic
and Trade Matters was convened in 1993 and meets annually to hold discussions
on the balance of trade, financial services, intellectual property, agriculture,
and other sectoral issues. Another joint committee on industrial cooperation
meets to discuss a wide range of policy and technical matters. In December 1995
a framework agreement was reached for the European Investment Bank to grant
long-term investment loans to China.(Note 31)

The EU has been a supporter of China's early entry in the WTO. At the same time as it has stood together with the United States, Canada, and other nations in insisting that China meet a variety of entry standards prior to admission (e.g., improvement in transparency of trade and investment laws and regulations and lowering protectionist import, investment and nontariff barriers, or NTBs), the EU has taken a different view from Washington in endorsing China's entry status as a "developing nation" in certain respects (and thus giving it more preferential entry terms). In an effort to help China meet these admission criteria, in March 1994 the European Commission and China began bilateral discussions within the GATT Working Party on China to discuss the liberalization of NTBs and the foreign-trade regime in China. These negotiations continue. While the United States and EU seemingly disagree about the status under which China should enter the WTO, both agree that bringing China into the WTO is a high priority-but not at the cost of WTO regulations. China must adhere to the WTO rather than vice versa. Substantial progress must be made in dismantling China's monopolistic trade barriers and other impediments to trade and investment before the PRC can become a full member.

Beginning in 1995, the EU and China also initiated a dialogue specifically on human rights. This does not replace or supplant bilateral dialogues with individual European states but is an additional forum. With the lifting of the ban on military-to-military contacts in 1994, exchanges in this sphere are gradually resuming, albeit in a bilateral context, as the EU has no military content. Finally, there has been an effort to systematize and regularize high-level interactions between the rotating EU presiding president and his Chinese counterparts, as well as more frequent interactions between the EU's Head of Delegation to China and between China's ambassador to the EU and its presiding president. The current EU Head of Delegation in China, Dr. Endymion Wilkinson, has been instrumental in formulating and implementing the EU's new China initiative.

These mechanisms all help to solidify Sino-EU relations and do much to build mutual confidence and contribute to the rapidly expanding relationships between the two sides. It can no longer be said that China and Europe are peripheral to one another. The bilateral and multilateral network of ties, while not grabbing headlines, have quietly anchored the relationships and laid the groundwork for the future expansion of ties, while the 1995 EU initiative on China has provided an overall policy framework and concrete proposals for deepened cooperation.

OUTLOOK
Throughout the Cold War relations between the People's Republic of China and European states (East and West) were strongly conditioned by broader relations with Moscow and Washington. This is not surprising given the roles each played in the superpower orbits. Nonetheless, during the 1950s Beijing was able to successfully establish contacts with several Western European nations in spite of Washington's opposition. Similarly, China demonstrated some independence of Moscow in its relations with Gromulka's Poland and Nagy's Hungary (only to reverse course in the latter case). During the 1960s, China's relations with Europe were severely attenuated because of the Sino-Soviet split and Cultural Revolution. After the Cultural Revolution relations reopened and, despite a downturn after 1989, have grown apace to the present.

Today Sino-European relations can be said to be in excellent overall health. This is largely the product of the end of the Cold War and the constraining influence that superpower bipolarity had on relations between Europe and China. The absence of such strategic structural constraints has permitted bilateral and multilateral relations between Europe and China to develop more individually.

While the trendline of improved relations can be expected to continue, there are potential hiccups on the horizon. One potential danger signal is the Taiwan issue. In the wake of Taiwan President Lee Teng-hui's June 1995 private visit to the United States, Taiwan Premier Lien Chan made a similar visit to Austria, Hungary, and Czechoslovakia (where he met privately with President Havel and Prime Minister Klaus). Taiwan's Vice Premier Hsu Li-teh also paid a private visit to Canada. Beijing naturally voiced strong opposition to these latter visits, although it did not take retaliatory actions similar to those against the United States. There will probably be more such "private" visits by Taiwan officials to Western and Central European countries, and they are bound to cause disruptions in relations with Beijing.
A related trouble spot is weapons sales to Taiwan.

Whether or not European companies will be permitted by their governments to again sell advanced weapons to Taiwan remains to be seen, although lower technology military sales can be expected to resume. At present the United Kingdom and Germany have blanket bans on such sales, but France, Italy and the Netherlands are toying with renewed sales. After 1997 Britain may no longer feel political constraints to such sales. Since the end of the Cold War there has been considerable pressure from defense manufacturers across Europe to tap new markets, and Taiwan represents a potentially significant arms market. They do and will continue to press their host governments and the EU to acquiesce to such sales, and European politicians are susceptible to such pressure so as to maintain employment and stimulate domestic economies. Such sales to Taiwan would undoubtedly produce a strong reaction from Beijing, including diplomatic and commercial repercussions. Europe has extensive unofficial relations with Taiwan, including trade and investment in excess of that with the PRC, and these ties should be maintained. Balancing Europe's interests with Taiwan and China will be difficult in the coming years.

Another variable is the future of Chinese reform policies. As long as China continues to develop a market economy and liberalize its foreign trade and investment regimes, European cooperation can be expected. Similarly, it is in Europe's interests that human rights be fully respected in China and that China adhere to international human rights conventions. Political reform in post-Deng China would also help to establish a positive consensus among European countries for further developing their ties with China. It is in Europe's broad interests that China be effectively but humanely governed.

Although geographically distant and no longer maintaining military forces in East Asia, Europeans also have an interest in the maintenance of peace and security in the Asia-Pacific region. There is a belief among many concerned parties in Europe that the People's Liberation Army (PLA) should become more transparent in its military doctrine, defense expenditures, weapons procurement, and deployments. Europeans believe that such transparency and confidence building measures will not only enhance peace and security in the Asian region but will also promote China's own security through reducing misperceptions currently existent among many Asian and western nations. The European component of the Council on Security Cooperation in the Asian-Pacific (CSCAP) is one unofficial forum to increase transparency and build confidence, but ultimately it is persistent efforts by European governments (in tandem with G-7 partners) that will improve transparency in the PLA. The European Union is also a member of the ASEAN Regional Forum, which offers another avenue to press China in tandem with Asian partners. Also, beginning in 1996, European and Asian Heads of State will meet annually, with security issues guaranteed to be on the agenda. In addition to pushing for improved PLA transparency, the issue of security in the Taiwan Strait should be addressed. The potential for military tensions in the Taiwan Straits to escalate underlie the belief that Taiwan should be fully brought into these dialogues and security-enhancing processes (at present Beijing is opposed to Taiwan's participation).

These future variables notwithstanding, Sino-European relations in general must be judged to be in robust health and improving in many realms simultaneously. The People's Republic of China and the member nations of the European Union (as well as the nations of central and eastern Europe) have many interests in common that should be vigorously pursued. The end of the Cold War has afforded them the opportunity know each other better and to develop relations more independently. Creating a sturdy axis between Europe and East Asia and between EU states and China will be very beneficial to future peace and prosperity in the world.

OVERLAPPING PLATES OF ARMOR: INTEGRATING CHINA INTO THE REGIONAL ARCHITECTURE OF THE 21ST CENTURY

James A. Kelly

MORE THAN EVER, MOST OF THE LARGER QUESTIONS ABOUT FUTURE ASIAN stability and peace, as well as questions about developing international structures, center around China. That nation is a regional great power now-indeed most observers believe that it can become a world power-and Americans as well as everyone in Asia must find ways to work with it. But it is important to be mindful that China is still developing and that its future as a potential superpower is still highly uncertain. There have been many premature predictions in both directions about China. These feed excessive anticipation, or occasional pessimism, from outside and concurrently feed fears of instability or dreams of power inside China.

As East Asia modernizes, multinational institutions are also developing. In each, China's participation is key but far from assured. For economic institutions, China is a willing member but more consideration needs to be given about how far China has to go as opposed to what it has achieved-specifically, to be a mighty producer and exporter of consumer goods. It seeks the advantage of "developing" status in the World Trade Organization (WTO).

James A. Kelly is President of the Pacific Forum/SIS in Honolulu, Hawaii. From 1989 to 1994, Mr. Kelly was President of EAP Associates, Inc., in Honolulu. Previously he served at the White House as Special Assistant for National Affairs to President Reagan, as Senior Director for Asian Affairs, National Security Council, and Deputy Assistant Secretary of Defense for International Security Affairs (East Asia and Pacific).

On multilateral treatment of security issues, China is much less interested and often seems to be hostile to the process. Clearly, China is torn between ambitions of regional leadership and fears of being entangled by strands spun by its lesser neighbors, presumably at the behest of greater powers seeking containment.

In 1995, Americans and East Asians came to grips with the policy poles of "containment" versus "engagement." Washington made clear at every official opportunity that its goal is to engage China and that it does not see China as an adversary. But other voices suggested that such a policy was unrealistic and that containment may be needed now. Voices inside China, equally unofficial but often associated with the People's Liberation Army (PLA), tended to find the voices they wished to hear among containment advocates. These new Chinese nationalists (who call themselves Communists) see foreign plots to contain China and restrain its growth by restricting technology and stimulating internal strife. There is both reality and paranoia in these perceptions.

The problem is how to convince China as it emerges that it must play by the rules, perhaps within newly developing regional structures. But for China to do that, it must be convinced that it is in its interest to treat those rules (and the structures behind them) as more than bonds from the West intended to hobble China. It must believe that its engagement and cooperation fully serve Chinese interests. As New York Times columnist Thomas Friedman put it, "America sees China as the 800-pound gorilla that needs to be housebroken. China sees itself as the 800-pound gorilla that should be able to sit wherever it wants."

One of the significant developments of the last year was China's use of force. So many in Asia thought that the Chinese threshold for using force-at least for many years until its forces were more modern-would be high. Most Southeast Asian leaders also thought that sweeping Chinese claims to the South China Sea would be pursued gradually, save for occasional recurrences of shoving with Vietnam. But in February 1995, both those views were set aside. Chinese naval forces had occupied Mischief Reef in the Spratlys, only 135 miles from a major island of the Philippines, and well within that country's claim as well as within its exclusive economic zone. And China made clear, in the face of quiet but remarkable ASEAN unity, that the tiny outpost would not be yielded.

Later in the year, the harsher side of Chinese power was shown again farther north. Tests of nuclear weapons resumed in China almost immediately after the end of the U.N. conference on the nonproliferation treaty. Soon after, Taiwan-China tensions soared in the wake of President Lee Teng-hui's unofficial visit to the United States and led to a major Chinese reaction. Beyond breaking off the cross-straits talks with Taiwan, new and personal attacks on Lee in the press, and a variety of signals to the United States, Beijing again chose to demonstrate willingness to use military power, at least for purposes of intimidation. This was done by successive exercises along China's coast opposite Taiwan, both featuring a "test" series of 500-km range M-9 ballistic missiles. The tests were announced and conducted in July and August in large sea areas just north of Taiwan.

REGIONAL STRUCTURES FOR ECONOMICS AND SECURITY
The Cold War brought attempts to persuade East Asians that regional structures would serve collective security needs. The 1950 multinational U.N. forces in Korea were a successful but untypical example. For many reasons, most other mechanisms tried during the Cold War were less successful. Scraps of the Southeast Asia Treaty Organization and Baghdad Pact can still be found by those with an historical bent, and little of these pacts remains. This was partly because the Asian nations were newer to political independence and partly because participants mistrusted each other. Mostly, there was no common sense of threat that could compare with the European situation that nurtured NATO, and Asian countries saw direct threats from the Soviet Union as matters of lesser concern and likelihood.

Perhaps because it has evolved with its participants, the Five Power Defense Arrangement (FPDA), linking Singapore, Malaysia, Australia, New Zealand, and the United Kingdom, has continued in effect and helped foster a steadily improved level of understanding, trust, and military complementarity, at least among the Asia-Pacific members.

American policymakers, too, were unenthusiastic about multilateral security dialogues when earlier interest in Cold War alliances flagged after the Vietnam experience. Pacific commanders were concerned about unfocused dialogues that could raise the possibility of creeping restrictions on movement in international waters, asymmetric force reductions, or nuclear restrictions. With the end of the Cold War and removal from deployed forces of tactical nuclear weapons, however, this became much less a problem. Even shortly before, in 1991, when Japanese Foreign Minister Nakayama suggested a forum to discuss regional security issues after the annual Association of Southeast Asian Nations (ASEAN) Post-Ministerial Conference, American reaction, as well as that of the ASEAN partners, was cool. The one-on-one, "spoke and wheels" formula was still more comfortable for American leadership.

From the President's first overseas trip-to Japan and Korea-the Clinton administration found room to endorse multilateral security dialogues in its "Pacific Community" concept. It did so while making clear that the multilateral process was not a smoke screen for American withdrawal. Since then, multilateral dialogues have received broad support that has gathered strength each year with an enthusiasm that goes well beyond American favor. The ASEAN Regional Forum (ARF) in particular has shown marked progress after but two formal meetings.

Regional economic structures have gained even faster acceptance, and APEC has developed rapidly, even if tangible accomplishments have been limited. The Asia-Pacific Economic Cooperation (APEC) organization was founded 7 years ago as a vaguely defined trans-Pacific economic forum. In this case, too, initial skepticism had to be overcome in Southeast Asia, and overcome they were, largely because of ASEAN fears that they were being left behind by regional blocs such as the European Union or North American Free Trade Area (NAFTA).

APEC has developed as the only significant regional organization with a broad participation and agenda that includes Taiwan. This occurred largely through Korean efforts in 1991 that brought China, Hong Kong and Taiwan into APEC together. Those efforts almost certainly would not be successful in the current atmosphere of Chinese hypersensitivity to Taiwan.

In September 1992 in Bangkok, APEC's 15 members transformed the grouping into a far more substantial organization. Now, following acceptance of the annual leaders' meeting that President Clinton initiated in Seattle in 1993, APEC has the potential to be more useful, certainly on trade issues and in eliminating impediments to commerce, and potentially even for political concerns. Yet last November at Osaka, when Secretary of Defense Perry mentioned the possibility of APEC involvement in security issues, referring to a distant future, there were howls of denial. These, of course, should be read in a contemporary context, but it does suggest an uneven path ahead.

Although APEC has been the most significant regional development in structuring economic relationships, much attention has also been given to the East Asian Economic Caucus (EAEC). Unveiled in 1990 by Malaysian Prime Minister Mahathir, this proposal remains controversial. EAEC was proposed as a consultative, deliberative body among Asians, complementary to APEC. But by excluding the United States and, especially, Australia and New Zealand, the proposal generated instant criticism, even raising the cry of racism. At base, it was seen as a response to the NAFTA that might become a bloc. American criticism was particularly vociferous and probably excessive in the initial reaction of the Bush administration. Opposition on these exclusionary grounds persists. EAEC has been attractive to some to some in Japan and China and others in the region during moments in which they feel American pressure to open markets, especially well-defended agricultural markets in Japan, Korea, or Taiwan. EAEC will remain an open, but unlikely option.

REGIONAL SECURITY STRUCTURES
ARF has become East Asia's most successful multilateral security mechanism. ARF is a celebration of ASEAN's own sense of security and its members' economic and political accomplishments. Colonialism is long gone, the Cold War is over, and once-feared Vietnam is now a member of the team. ASEAN as an organization reflects the comfort that the its members have come to enjoy in conferring together and in engaging outsiders in a group. ASEAN has come to enjoy being courted at its "post ministerial conference" (PMC) by seven major dialogue partners-Japan, Korea, U.S., Australia, Canada, New Zealand, and the E.C. The PMC in 1995 spawned ARF, with Russia, China, and others invited as observers. This sort of governmental discussion of security and confidence-building measures is called track one.

Although Asian diversity limits any common view of security problems, multilateral talks with big powers are occasions that bring smaller partners together. And the big power that is most difficult to engage is China. In response, the very arrangement for ARF is set by ASEAN and has themselves at the center, with a principal but unstated purpose of engaging China. The ARF provides a way to do that, in a group, on ASEAN turf.

ARF does have limitations. First, the most serious security concerns in East Asia are far from ASEAN, in Northeast Asia. Second, Taiwan is not only not present but is a forbidden topic as a condition of Chinese participation. Finally, for more direct and serious security concerns, traditional bilateral arrangements are still available to undergird the newer structure.

Track-one discussions of the ever-sensitive issues of Northeast Asian security have no structure comparable to ARF, although, to be sure, there is nominal attention to the Korean question at ARF. There is often talk about the "Four plus Two" formulation for security discussions in Northeast Asia that goes back many years. It was re-introduced by South Korea's President Roh Tae Woo in 1988 at the United Nations. Originally, the four plus two was favored because it would lead to the "cross-recognition" of South and North Korea by the then Soviet Union, and China and, on the other side, the United States and Japan. But the end of the Cold War, the end of the Soviet Union, and South Korea's strength and energetic diplomacy brought Seoul the ties it had so long wanted and caused cross-recognition to be overtaken by events. North Korea in turn has seen the formulation as more of a "five plus one" than a "four plus two." And as odd man out, North Korea has opposed any such unmanageable forum.

TRACK-TWO PROCESSES
The multilateral security dialogues at the track-one level have been steadily supported and informed by nongovernmental track-two dialogues. Over the past 20 years all kinds of conferences and fora have proliferated as a part of the growth of the vibrant East Asia region. Even single conferences such as the Asia Pacific Roundtable, held annually in Kuala Lumpur and sponsored by the ASEAN Institutes of Strategic and International Studies, have come to play a second-track role. Interestingly, there is still no real Asian equivalent to better known European security meetings such as the Wehrkunde conference or the Bilderberg Group. Three second-track fora do currently play a useful Asia Pacific role by backing up and informing the multilateral process.

The second meeting of the ARF itself (August 1, 1995) explicitly called for linked track-one and track-two activity and set up Inter-sessional meetings (ISMS) and a support group (ISG) to review such topics as peacekeeping, confidence building measures, and defense policy papers. These inter-sessional fora are beginning work this year under the leadership of Indonesia, chair of this year's ARF.

The Northeast Asia Cooperation Dialogue, developed by Professor Susan Shirk and the University of California Institute on Global Conflict and Cooperation, has had four annual meetings. This is a carefully organized second-track version of the "Four plus Two" formula and has had valuable participation by both academics and policy officials. But reflecting the intractability of Northeast Asian problems, progress has been slow and North Korean participation reluctant.

The Council for Security Cooperation in the Asia Pacific (CSCAP) has been the most organized of the track-two efforts. Ten regional security-oriented institutes, including the Pacific Forum/CSIS from the United States, joined in July 1993 to form CSCAP. Each institute established broad-based member committees comprising academics, security analysts and commentators, and former and current defense and foreign ministry officials. From the beginning CSCAP was intended to be inclusive of all Asia Pacific countries and territories that support multilateral dialogue. With the addition of North Korea and Russia, membership has reached 13, plus associate members from India and the European Community. But despite the second track, nongovernmental membership for institutes, and "member" (not national) committees, no institute from China has joined, clearly out of Beijing's determination to exclude any Taiwanese institute. After long attempts to find a formula, China is expected to join this year with Taiwan participation limited to individuals in working groups.

CSCAP's work is aimed to support official dialogue on cooperative security and especially the ARF. Its work is accomplished through four working groups, each led by two member committees, with titles such as Confidence and Security Building Measures or Comprehensive Security. The former in particular has had considerable accomplishment toward transparency and the U.N. Arms Register. A third working group is on Northeast Asia and, although moving ahead, still waits for the opportunity to include North Korea and China.

CHINA AND MULTILATERAL SECURITY
As a major power, China has major reluctance about multilateral processes and dialogues of any kind. Even in trade, it is arguable that Chinese mercantile interests might be better served by it staying out of the World Trade Organization (WTO). In fact, China very much wants to join, although terms are at issue. For China, which is so inevitably focused on issues which it considers sovereign, one wonders why the language from American political debate (e.g., Pat Buchanan, who bitterly attacks the WTO as a relinquishment of sovereignty) has not found a different home.

Concerning multilateral security processes, China has even greater reluctance. First, China fully espouses the importance of balance-of-power politics among big players, as opposed to batting issues about among groups of smaller players. Second, as a big and powerful country, Chinese interests are usually best served by dealing one-to-one with smaller countries. The need to compromise over diverse concerns is likely to be less and there will be much less ability for any particular dialogue partner to call for equal treatment on any specific position or concession. Third, there is apparent concern that lesser neighbors will increase their leverage in a multilateral setting, which receive greater public focus. Finally, China is clearly ambivalent about the basic confidence building measure, transparency. Its habits are secretive as a general principle, and with defense as China's lowest priority for its modernization, there may be concern about what it may perceive as showing weaknesses in its defense structure. Those who see containment strategies around are also likely to see multilateral fora as potential dangers.

Nevertheless, China has engaged, if hesitantly, in ARF and in various track-two fora relating to security. Its many institutes are full of articulate spokesmen and scholars who can fully hold their own with interlocutors from anywhere. Second, China seeks regional stability and its multilateral engagement can help that. Finally, China is opening to the outside world and this sort of engagement is apart, but it will join slowly and carefully.

CHINA AND ITS NEIGHBORS
Any discussion of Chinese relations with its many bordering and neighbor countries is obviously beyond the scope of this paper, but China's sophisticated foreign policies use bilateral relationships to pursue multilateral objectives. Two examples worth brief comment are the remarkable new Chinese relationship with South Korea and its South China Sea/Nansha Islands (Spratlys) policies.

China's attitudes toward both South Korea and its nominal North Korean ally have been complex, but interesting and important. First, China's trade with South Korea-begun even before the 1991 normalization-has surged to levels far beyond what ever was the case with the North. Second, Chinese political leaders, most notably President Jiang Zemin, regularly visit Seoul to meet with South Korean President Kim Young Sam and his government. China seems to see the South Korean economic and political model as one that it wishes to emulate (with the probable exception of the trials of former presidents). This Beijing-Seoul activity brings stony silence from Pyongyang. Finally, in a first, China directly criticized North Korea's campaign to undermine the 1953 armistice and its well- tested mechanisms. It also publicly questioned the seriousness of some of the recent North Korean hunger reports, putting emphasis to Seoul's variance with the apparent determination of the Clinton administration to respond with food aid, even at some cost to the vital American relationship with its ally.

This is one example of how the emerging relationship of Seoul and Beijing complicates the old ties of Tokyo and Washington with Seoul. For example, while visiting Seoul, Jiang was quick to criticize Japan's shortcomings in addressing the history of its brutal occupation of Korea. With an eye to the future, this plays to the sentiments of millions of Koreans. It also puts Tokyo in a more difficult position on current issues with Seoul. For their part, Americans need to understand that newly prosperous and assertive South Koreans also harbor unwanted feelings of dependency and pique with Washington, which are also stroked by China. These feelings could well have implications over the long term in U.S. relations with Northeast Asia.

The situation in the South China Sea is less diplomatic. Amid hopes for oil and gas, a shallow South China Sea with vital sea lanes is patched with territorial claims by China, Vietnam, Malaysia, the Philippines, Taiwan, and Brunei. China's remarkable and sweeping assertions to most of the South China Sea-many hundreds of miles from contiguous Chinese territory and including the entire Spratlys (Nansha) and Paracels-have caught everyone's attention, especially Vietnam, whose forces were pushed by China from several islets in 1988. With informal South China Sea talks proceeding a year ago, many observers felt that the timeline before any possible use of force would be lengthy. But in February 1995, those views were set aside. Chinese naval forces had occupied Mischief Reef in the Spratlys, only 135 miles from a major island of the Philippines and well within that country's claim as well as within its exclusive economic zone. With the seizure, China made clear that the tiny outpost would not yield easily. The first projection into any country's claim other than Vietnam, this was clearly a military act and more than an aid to fishermen.

At the news, tensions climbed across Southeast Asia. The spotlight quickly turned to look for U.S. response, which was quite slow in coming. Long-standing U.S. policies to take no position on any of the South China Sea claims and to emphasize open sea lanes were not what Southeast Asians wanted to hear.

Even though U.S. reluctance to involve itself in the competing claims is quite appropriate, the extensive Southeast Asian press comment showed the feelings of weakness in China's face and sensitivity to U.S. presence. Moreover, the Chinese claim, a great teardrop shaped assertion of sovereignty across the entire South China Sea irrespective of islands or distance from China, is one that no U.S. Government could ever support, but it was reluctant to say so. The formal U.S. response, on May 10, 1995, called for peaceful resolution of all disputes, and emphasized freedom of navigation as the important interest. It satisfied neither Southeast Asia nor China but did elicit Chinese representations during the ASEAN summer ministerial meetings at Brunei that "Law of the Sea principles" should apply to resolution of all South China Sea conflicts. No further incidents have occurred, and Chinese diplomacy has aimed with some success to reassure the Southeast Asian concerns, but with neither specific concessions nor any withdrawal from the mini-islands near the Philippines.

POSSIBLE EVOLUTION OF ASIAN STRUCTURES
Multilateral structures have a European kind of ring. There the tradition is of codes and laws and carefully planned efforts to create structures that can help with business or security problems. The structures tend to work better, as the former Yugoslavia demonstrates, on more manageable types of economic problems. The Asian tradition is quite different. There, business comes first, often sustained by personal relationships. Structures and institutions are fashioned later to fit the practices that have evolved. In this way, APEC, and to a lesser degree the ASEAN PMC and ARF, has been something of a process in search of solutions.

In East Asia, the greatest interest in multilateral security mechanisms has been from Australia, New Zealand, and Southeast Asia. These newly wealthy areas feel small by comparison with China and uncertain about whether the United States will be around if some kind of help is needed.
Japan in recent years has also had a greater academic and political interest in multinational security. Part of this is a response to the end of the Cold War and part is a replacement among Japanese leftwingers of the 1960s era "unarmed neutrality" posture. Some observers see possible future disillusionment in any too hasty Japanese embrace of multilateral security mechanisms. Funabashi notes that success in multilateral diplomacy is most likely for nations that articulate their own self-interests and put forth a strategic vision. These are qualities that have been lacking among Japanese politicians.

Chinese are all too conscious of the humiliations that their country endured for centuries. As a developing great power, China aims to steadily build a strong navy and other forces capable of projecting power well beyond its borders. It denies territorial ambitions but intends that China's interests in every situation will have to be carefully weighed by each of its neighbors. China intends to be militarily intimidated by no one. It may choose to back away on some issue for its own reasons, but intends to yield easily on no issue, whether it be sovereignty in the South China Sea, India's desire for a free hand in the Indian Ocean, or even the routine passage of an American warship off its coast.

Chinese skepticism will clearly continue toward multilateral mechanisms, at least for security concerns. It would be a mistake to believe that China will not play. China wants to be seen as a leader and is unlikely to stay away from such fora for long. Moreover, more than in Japan, China's leaders have a clear strategic vision. Patient engagement may then bring participation and eventually results, especially when pursued with persistence and in a way that does not clash with basic Chinese interests. This is almost certainly the way to bring China into dialogues on strategic missiles and weapons of mass destruction.

SUGGESTIONS FOR U.S. POLICY

Recognize bilateral relationships as the basis for effective multilateralism. As
useful and promising as a multilateral dialogue framework may be, it is a complement, not a replacement for effective bilateral relationships. In the current state of world politics, many dialogue partners, despite good intentions, will have interests too peripheral to be decisive in a crisis. Potential problem areas are the strong suit of the multilateral process, which is precisely why China and the United States need to be involved. Resolving crises after they are in progress, however, is a task poorly suited for a forum such as ARF. If a core strength of a sound bilateral relationship exists, there is more likely to be the confidence that may permit a solution.

Support multilateralism but recognize it cannot be done on the cheap. For the United States, multilateral politics can be labor intensive for those officials with the authority and responsibility to address broad political and economic issues, of which the United States has relatively few. Worse, the officials with this kind of clout are all too often caught up in Washington policy and turf battles and find it hard to make the extensive travel that is necessary. Ambassadors to the countries involved are important but are by nature bilateral.

Patience can bring China to useful multilateral engagement. China is as new to great power status as the United States and its neighbors are to treating it as such. Since Nixon opened American policy to China, the United States has been consistently engaged with it. Within that context, however, past American policies have lurched from balancing the then-USSR to unrealistic expectations about China's huge internal market to confusion about how to frame human rights policies. The reality calls for patient but difficult work, to engage China, bilaterally and multilaterally, without giving it a sense of being entangled.

Forward deployed American military and naval forces must continue to be the heart of its political and security strategy in East Asia. This has much less to do with the successful conduct of hostilities than with the interplay of economic and security policies. The United States is a Pacific power. Its markets and economy do have to be a part of the world's most dynamic area, but the United States is not an Asian power, and must never forget the tyranny of distance. For that reason, presence in East Asia, in the form of capable military forces close at hand or over the horizon, is a critical part of overall U.S. policy. Strength need not be 100,000, but reductions must be carefully explained.

Grumbles from Southeast Asia that the United States was quietly cutting the naval and air forces that visit Southeast Asia became muted when China's foreign minister suggested last July that the United States was an "outside power" with no role in the subregion. Nothing does more to build support for the United States among Asians as a regional balancer than suggestions from China that it go home.

But how U.S. political, military, and economic interests fit together in East Asia is not fully understood by many Americans, including some in the Congress. The entire U.S. strategic mindset is conditioned by forward deployments. America's Asia-Pacific frontier is not at the continental coastline, but far to the West. This feeds a psychology that is essential, in itself, to successfully balanced economic and political policies. This has to be explained and justified, again and again, to Americans who do not understand why faraway international imbalances can injure the lives of ordinary Americans. Mix in air power or "surgical strike" advocates with old fashioned isolationists, and there is danger that the successful, but complex strategy of engagement in East Asia could be undermined.

EMERGING MILITARY CAPABILITIES

Ralph A. Cossa

THE EMERGING MILITARY CAPABILITY OF EACH OF THE THREE MAJOR POWERS in Asia-China, Japan, and the United States-and how it affects the region is a topic in need of immediate analysis. It is not, however, necessary to address respective orders of battle, in part because they are common knowledge to most and readily available elsewhere, but more importantly because a recitation of numbers per se is not particularly relevant. It is military attitudes and intentions and regional perceptions regarding general and relative capabilities that are more germane to this discussion.

One order of battle-related observation is necessary, just to keep a proper perspective: namely, that the Chinese People's Liberation Army is roughly 20 times the size of the Japanese Self Defense Force and is equipped today with nuclear weapons, long-range bombers, ballistic missiles, nuclear submarines, and similar strategic forces. This is pointed out because it is interesting that the same Chinese officials and scholars who say that China is not, and should not, be seen as a threat, will also say that Chinese defense modernization, at least in part, is driven by a concern about emerging Japanese remilitarization. The numbers make this argument somewhat disingenuous.

First, China is not as great a threat as the Chinese would like you to believe they are. Chinese protestations notwithstanding, the Chinese enjoy being seen as a threat. In fact, much of their foreign policy, especially vis-a-vis Taiwan at present, is based on perpetuating this perception. True, China vehemently objects whenever anyone refers to the "China threat" but Beijing still wants to keep this perception very much alive in the back (if not the front) of all its neighbors' minds.

Ralph A. Cossa is Executive Director of the Pacific Forum CSIS in Honolulu. Mr. Cossa, a political/military affairs and national security strategy specialist with over 25 years of experience in formulating, articulating, and implementing U.S. security policy in both the Asia-Pacific and Near East-South Asia regions, served in the U.S. Air Force from 1966-1993, achieving the rank of colonel.

Japan, on the other hand, is not a threat to anyone today and is not likely to become one anytime soon, provided the U.S.-Japan alliance remains intact. Japan has the ability to become a major military power but lacks the desire and, at least at present, the incentive. It is in not in Japan's or America's or anyone else's interest to provide that incentive. And, contentions by Chalmers Johnson and others notwithstanding, Japan does not have to become a major military power or break its alliance with the United States in order to become a "normal" nation.

Finally, the United States , despite being the world's only superpower, seems to be having difficulty getting anyone in the region to take it seriously and today threatens only itself. Anyone observing the administration and Congress during the bureaucratic battles that not once but twice closed down the U.S. Government has to conclude that Pogo was right-we have met the enemy and he is us.

The United States does have a credible military strategy, outlined in the East Asia Strategy Report and implemented through the U.S. Pacific Command's Cooperative Engagement strategy, but remains suspect in the region due to diplomatic and political inconsistencies that some label as ineptness or worse.

THE PEOPLE'S REPUBLIC OF CHINA
Is China a threat today? Will it be one tomorrow? It depends, first and foremost, on who you ask, or more specifically, on how close to China they live. From a U.S. perspective, it is difficult to see China as a major threat today or in the next few decades. If China possesses the level of military capability 20 years from now that the United States possesses today, it would be a great surprise.

The view from Hanoi, Manila, Taipei, or even Tokyo is quite different however. In relative terms, China is already the region's 800-pound gorilla and many of China's neighbors are uncomfortable about the ease with which U.S. analysts tend to dismiss the "Chinese threat." To them it's real and it's growing, and Beijing's continued saber rattling, not just vis-a-vis Taiwan but also in the South China Sea, serves to increase their apprehensions, even if China's power projection capabilities today are extremely limited.

China is clearly intent on developing a more powerful military, one befitting a great regional if not global power. That it has received a number of the 72 SU-27s ordered from Russia, plus production rights to build more in China, is just the latest in a series of efforts, both through procurement and through indigenous development, to expand China's military capability. The Chinese contend that they have as much a right as any other nation to develop a modern armed force and that their military is still decades behind many of the region's militaries. And they are right on both counts.

Chinese officials are quick to acknowledge that the threat to their security today is lower than at any time since the founding of the People's Republic, yet they see many potential threats and security concerns that justify their efforts to continue to modernize their forces:

Three powerful neighbors (U.S., Japan, Russia), each with the ability to project power against China

A complicated situation on the Korean Peninsula that could degenerate into warfare

Lingering territorial disputes, especially over the Spratly Islands in the South China Sea

India's development of nuclear weapons and long-range delivery systems

Nationalism in Inner Mongolia, Tibet, and elsewhere in China, which represents an internal security challenge

Possible social unrest in Hong Kong, supported by "foreign forces" and, of course,

Taiwan's growing independence movement and the "fact" that Taipei's military already has some air and sea superiority over the mainland's forces.

Regarding Taiwan, the issue over whether or not the PRC could militarily "defeat" Taiwan, while perhaps interesting and intellectually stimulating, is largely irrelevant. Short of a de jure declaration of independence by Taiwan, or an action seen by Beijing as a de facto declaration (and there's considerable room for debate over what would constitute such an action-perhaps a Lee Teng-hui address to a joint session of Congress), China will not use force against Taiwan. They have said as much. On the other hand, if Taiwan is perceived by Beijing as crossing this imaginary and purposely ill-defined line, China will feel compelled to react militarily regardless of the odds of success or anyone's estimates of the military, political, or economic costs.

Finally, there is the matter of Beijing's military exercises in and around the Taiwan Straits. Military exercises normally have at least two primary purposes: developing military capabilities and demonstrating commitment, resolve, and/or concern. This is precisely why the United States, until recently, held annual Team Spirit exercises in Korea. It is why the Chinese are holding, and will continue to hold, exercises off Taiwan. The more excited we get over these exercises, the greater becomes their political or psychological significance. The Chinese are no doubt extremely grateful for all the fuss we are making over these exercises, which, if carefully analyzed, would likely reveal more about PLA limitations than capabilities.

It is certain Lee Teng-Hui had absolutely no intention of declaring independence at any time during his election campaign or since his re-election. The Chinese, however, were convinced that Lee was firmly headed down the independence path during his re-election campaign and it was only their saber rattling that caused the "reveral" in Lee's decision. As a result, China will continue heavyhanded saber rattling whenever it wants to "influence" Taiwan's thinking, without realizing that this is undermining and demoralizing reunification supporters on Taiwan, while also providing live ammunition to anti-PRC and pro-Taiwan independence elements in the U.S. Congress. Of course, when these U.S. critics prove incapable of resisting the temptation to fire this ammunition at the PRC, Beijing will interpret this as further proof that the United States is embarked on a course to contain China, once again making China the master of self-fulfilling prophesies.
JAPAN
The latest Japanese National Defense Program Outline reflects a Japanese commitment to maintaining the U.S.-Japan alliance as the centerpiece of its defense strategy and also includes some modest downsizing in force levels or more accurately, in force authorizations. This was played up in the New York Times as another example of Japan taking a peace dividend at America's expense.

In reality, the announced 25 percent reduction in force allocations merely brings the number down to the amount that Japan has been able to successfully recruit to serve in the armed forces. The actual reduction was about 5,000 troops, or 3 percent. The United States has taken a legitimate 25 percent cut in troop strength since the beginning of this decade. Those who continue to talk about Japanese remilitarization should also note, if not solace in, the fact that Japan continues to experience difficulty in recruiting enough soldiers to man what is a considerably undersized military by almost any definition. It is, nonetheless, a very capable force, albeit one that is defensively focused and very expensive to maintain. Contrary to the allegations of many critics, Japan does not get a "free ride" on defense. It has the second-largest defense budget in the world, but the U.S.-Japan alliance allows Tokyo to focus its efforts on self defense and sea lane protection, eschewing the development of a "stand alone" military capability that would appear threatening to its neighbors, regardless of Japanese intent.

Those who insist that Japan "go it alone" fail to explain how a militarily independent Japan would serve U.S., Asian, or even Japanese long-term interests. Today, Japan's defense effort complements, not competes with, the U.S. security role in Asia. Rather than being the Cold War anachronism that some claim, this cooperative sharing of responsibilities actually provides a post-Cold War model worthy of emulation.

This does not imply that Japan cannot or should not accept more of the defense burden; it can and should and is in the process of doing so, in a gradual, responsible manner consistent both with its own psychological and constitutional restrictions and with its neighbors' concerns. Japan is also destined to play a more active role in regional and global defense arrangements, such as increased participation in peacekeeping operations. This should not be seen as threatening to anyone, especially if done within the context of U.N. or other multilateral settings and within the framework of the U.S.-Japan alliance.

UNITED STATES
There is little need to devote much space to U.S. force capabilities in Asia because no one really doubts U.S. military capability. It is the U.S. commitment to remain engaged in Asia that is continually in question. The United States is committed to remaining a Pacific power but is doing a poor job demonstrating it, given our preoccupation with crises elsewhere. Of course, continuing to wait until there is a crisis before devoting necessary attention to Asian affairs will help ensure that crises come sooner rather than later.

REGIONAL IMPLICATIONS
There is no arms race going on in Asia today. Nonetheless, most countries in the region are in fact modernizing their forces and increasing their capabilities, especially their naval and air forces. The primary reasons have little to do with fear of big power buildups but are more economics driven, in two respects. First, they are modernizing because they can afford to do so. Second, and more importantly, the U.N. Convention on the Law of the Seas, with its authorized 200-mile exclusive economic zones, provides additional incentive to develop the ability to at least operate in and monitor, if not actually defend, these national zones.

Regional anxiety over major power intentions cannot be dismissed as a motivating factor, however. Ironically, a Chinese military buildup is the least likely to result in a regional arms race. Given China's overwhelming size, few would see matching fire with fire as an option. Instead the nations of the region will either look to the United States as a counterbalance or, if they believe this is not going to be there, will seek another option, the most likely one being accommodation with Beijing.

Absent a break in the U.S.-Japan alliance, Japan will not develop a stand-alone capability, and few will seriously consider Japan a threat. Beijing and the Koreas, however, may find "Japanese militarism" as a convenient excuse to justify actions that they would take anyway. Should the U.S.-Japan alliance disintegrate, then all bets would be off. Japan would have little option but to develop a stand-alone military. This option is so costly and so potentially destabilizing, however, that these factors should help ensure that this path is not pursued by either side.

That leaves uncertainty about the United States as the largest unknown. It is not a military buildup but a military withdrawal that will result in the greatest anxiety and perceived need to "fill the void." This, once again, underscores the importance of a continued U.S. military forward presence in Asia. This does not mean that force levels cannot come down. The East Asia Strategy Report's 100,000 force level figure-which is not an open-ended commitment but a forecast, based on the Pentagon's Bottom Up Review of force requirements through the end of this decade-will and should be adjusted as threat perceptions change. But some sustained, credible U.S. military presence, in the form of forward based, forward-deployed, and rotating units, appears critical to future stability.

RUSSIA'S SECURITY AND ECONOMIC INTERESTS IN THE
ASIAn-PACIFIC REGION

Yevgeniy V. Afanasyev

THE ASIAN-PACIFIC REGION HAS GROWING IMPORTANCE FOR THE SECURITY
and economic development of Russia. Two-thirds of Russian territory lie in Asia. A traditional Pacific maritime power, Russia borders several Asian countries, including China, Japan, Korea, and the United States.

One can not but see the formation of a zone of dynamic economic growth in Asian-Pacific region. The integration of Russian Far East and Siberia into this dynamic region becomes an imperative that can accelerate Russian economic reforms and development. The rise of China and Japan to the status of world powers also requires attention to this region.

As Russia develops partnerships with the countries of the Asia and Pacific region, favorable conditions are created for the integration of the Russian economy into the regional economic systems. Russia has already made its first steps in this direction, but our great potential is not yet fully utilized largely because of the difficult economic situation in the Far East and Siberia regions.

With the end of the Cold War, the economic situation became more stable and more predictable. Rapid economic growth leads to a search of new forms of cooperation, such as the formation of a regional mechanism of security and stability and the appearance of a new philosophy of open regionalism and stable development. At the same time, the growth of geopolitical ambitions of some states and the ongoing arms race in the region create potentially acute conflict situations, such as with the Korean peninsula, the Taiwan Strait, and territorial disputes such as those in the South-China Sea and between China and Japan. Extremist and nationalist tendencies may increase the tensions. The situation could be seriously aggravated by ecological and migration problems as well as by the competition for raw resources, primarily energy resources.

Yevgeniy V. Afanasyev is Director, First Asia Department, Russian Ministry of Foreign Affairs, Moscow. Since 1970 he has served in the USSR/Russian foreign service. Prior to assuming his current position, he was Principal Deputy Director, First Asian Department.

With this in mind, the preservation of Russia's national interests in the region will depend in great measure on how effectively Russia uses its potential in the political, economic, diplomatic, and military areas with the emphasis on diplomacy and economic cooperation.

The long-term goals of Russian policy in the Asia Pacific Region are:

Formation of a system of international security that will guarantee Russia's interests in the region by political means and include Russia's actively participate in the settlement and prevention of regional conflicts

Gradual integration of Russia into the forming mechanisms of regional economic cooperation while preserving the balance of rights and obligations of each participant state

Preservation of Russia's role as one of key providers of political and military balance in the region

Russian Foreign Policy Conception is based on the need to guarantee the independent Russian role in the multilateral system of regional international relations. It emphasizes the extreme importance of maintaining stable, balanced and, to the degree possible, independent relationships with all countries of the Asian-Pacific region, especially with such key states as China, the United States, Japan, countries of the Korean peninsula, Indochina, and ASEAN members.

Analysis shows that in the Asia-Pacific region Russia does not have irreconcilable differences with any of the great powers or group of nations. This creates a fertile field for Russian diplomacy and the possibility of an independent balanced line acceptable to all major players in the region.

The system of international relations in the region will be neither unipopular nor bipolar. It will be polycentric-not in the old diplomacy sense, as several power centers competing with each other, but in a new, gradual appearance change of the relationship among the countries of the region. It will be a relationship marked by cooperation and integration of economic factors with specific asymmetrical zones of common interests while simultaneously preserving natural differences of interests of the separate states.

Russia, by its geopolitical position, is a unique country. It is simultaneously a global, European, and an Asian power. For centuries it had close ties with both Europe and Asia. Its culture is a combination of European and Asian values and in many ways Russia has served as a bridge between these two great civilizations. Additionally, the future of Russia's vast Siberia and Far Eastern regions is closely linked with that of the Asia Pacific region.

Many positive factors are gaining strength in the Asia-Pacific region-the diminution of the role of military force, transformation from geopolitics to geoeconomics, an increase in the negotiations process on subregional and regional levels--so that the situation in general is more predictable than before, and therefore it may be possible to maintain relative stability in the Asian-Pacific region. The danger of a serious military confrontation looks very unlikely, largely because of the stabilized balance of forces in Russia, the United States, Japan, and China.

From an economic perspective it is increasingly evident that military force has its limits as one of the main methods to preserve a country's national interests. However, there are still potential sources of conflicts in the region based on the unsettled territorial, ethnic, religious, and other disputes. The different understanding of human rights adds certain tension. More importantly, there are no well- established mechanisms to preserve mutually acceptable checks and balances on the basis of multilateral agreements.

Russia stands for a progressive buildup of cooperation in the area of security and for the creation of respective regulating mechanisms. Formation of the security system in the Asian-Pacific region on the basis of the already existing infrastructure of bilateral and multilateral cooperation will not drastically rupture the mutual politico-military obligations of separate countries or groups of countries. Movement toward this goal should be gradual, starting from local subregional agreements to regional, from simple confidence-building measures (CBMs) to more complicated ones. Russia tries to maintain equal relations with all countries of the Asian-Pacific region and to develop close cooperation with those countries who are interested in the settlement of existing disputes and the prevention of new regional conflicts.

The actual task is to deepen constructive dialogue on politico-military topics. This is especially important in the context of a real need to curtail regional arms-race acceleration. The dialogue must include "soft" structures like multilateral meetings on security in the northern parts of Pacific Ocean and the north-east Asia held under auspices of institutes of strategic studies in Malaysia, the United States, and others.

We regard the ASEAN Regional Forum (ARF) as the acceptable basis for developing a dialogue on security in the region. In a sense, this is a unique phenomenon, because for the first time in Asia an intergovernmental forum was created to discuss ways of consolidating regional security. We think that this dialogue has a good future and we intend to contribute to the success of its work.

Russia attaches great importance to the decision taken at the last ministerial meeting in Brunei to move to the formation of a security community in Asia and to do it step by step, moving from confidence- building measures to preventive diplomacy and then to the creation of conditions to prevent and solve conflicts.

The important decision is also to approve at the annual ministerial meetings concrete recommendations proposed by groups of experts. The support group on CBM measures will be headed by Japan and Indonesia, the group on peacekeeping operations by Malaysia and Canada, a seminar on cooperative activity and search and rescue operations at sea by Singapore and the United States. The Russian proposal to hold in Moscow in spring 1996 a meeting of experts to fine tune the draft declaration about the principals of security and stability in Asia was also approved.

Russia is ready to join the Treaty of Friendship and Cooperation in the South East Asia when it will be open for signature by nonregional powers. It is also important to us that Russia be regarded by other ARF participants as an important political and perspective economic partner.

We think that ARF, despite its young age, has already positively influenced the regional situation. For example at the ARF-2 meeting, China had to make corrections to its position on South China Sea islands by declaring its readiness to solve this problem by peaceful means on the basis of negotiations and the principles of international Law of the Seas and by not creating obstacles to the freedom of navigation in the South China Sea. ARF-2 participants unanimously condemned the French decision to resume nuclear testing in the southern part of the Asian-Pacific region.

Among Asian and Pacific countries there is no single opinion about the speed with which CBM measures should be introduced. While several countries stand for the speedy implementation of them, others desire a slow introduction after more general agreements about ARF activity in the future. We think it is important to find a middle ground, an approach that will not pass ahead of events, thus provoking some countries dissatisfaction, and at the same time that will deepen and create a set of steps really fitting to Asian and Pacific realities agreed upon by the ARF members.

A number of other concrete measures we can work on to enhance CBM security include hotlines between member-countries, the transparency of military doctrine and budgets, frequent contacts between the military agencies and the forces commands (especially between the Navy commands), and enlarging the practice of prior notice of military exercises with increased invitations for foreign observers, while limiting their duration, frequency, and size.

Russia's current position is significantly different with that of previous years. We do not demand the immediate withdrawal of all foreign forces from the territories of other states. For example, being realists, we think that U.S. military forces in Asia are currently playing the stabilizing role. It might be much worse if the situation became one a of an accelerating arms race, including weapons of mass destruction, or the creation of various coalitions, in an attempt to fill the vacuum.

Looking to the future, Russia stands for the formation of a collective security system in the Asian-Pacific area based on specific Asian reality and with the participation of all states in the region. We believe that Asian-Pacific states, particularly those with an especially strong military, should form a system of mutual restraint. They should take into consideration their partners interests, engaging in consultations when their decisions might seriously affect other states interests.

By "turning to the East," Russia aims to use the great economic potential of its Asian territories to contribute to market economic reforms and also to guarantee the inclusion of Russia into the Asia and Pacific economic space. We think that Russia should fully participate in the creation of new model of international economic cooperation in Asia oriented at the 21st century.

Russia stands ready to cooperate constructively with all interested countries as well as regional and international organizations. For this, we all need a new concept of multilateral economic cooperation in the Asian-Pacific region. Russia supports the concept of open regionalism; according to our deputy prime minister O. Davydov, orientation to the East is the strategic course of Moscow as approved by President Yeltsyn. Our most promising partners in Asia include China, India, the Republic of Korea, Iran, Pakistan, and countries of ASEAN. For example, cooperation between Russia and China might be a powerful tool to spur Asian and Pacific markets. All the necessary conditions for this exist, including a favorable political climate.

Of course, the geographical proximity of Russia and countries of the Pacific is not the only reason. The center of world trade is moving to the Asian-Pacific region where even now they have 40 percent of all global trade. Russia has a very solid economic foundation with many of Asian countries that includes such important industries as energy, metallurgy and mining. Because of previous Russian assistance in building the infrastructure, Russian machinery and equipment are well known and trusted in Asian countries. According to the Russian ministry of foreign trade estimates, machinery and equipment represent 85 percent of all Russian export to Iran, and 20 percent to China (the average figure for all countries is just 6 percent). According to estimates, the volume of Russian trade with Asia and Pacific countries currently is more than U.S. $20 billion a year, or 25 percent of all Russian foreign trade. The amount of trade is constantly growing.

On March 17, 1995, Russia officially applied for membership in the Asia and Pacific Economic Cooperation (APEC). We are convinced that by exercising market reforms, by supporting various forms of economic and other cooperation with the majority of countries in the region, and by enlarging these ties, Russia fully meets the basic criteria for membership at the APEC. Russia highly values the strong support for its APEC membership by the Republic of Korea.

Before the end of the moratorium for new membership at the APEC it is important that Russia participates in its working groups particularly in areas where Russian capabilities are well known, such as transportation, communications, energy, and natural resources. For example, Russia is number one in the Asian-Pacific region in the amount of natural resources; third, behind China and ASEAN countries, in human resources; and, third, after the United States and Japan, in the area of technologies.

Countries of the Asian-Pacific region are traditional trade and economic partners of Russia. Trade with them represents 25 percent of all Russia's trade in 1994. The largest partners are the United States, the People's Republic of China, Japan, Republic of Korea, Taiwan, Thailand, Hong Kong, and Singapore. Trade with the Asian-Pacific countries is developing faster than with the countries of Europe. Russia is building the necessary legal foundation for its economic relations with the countries of the region.

Of the 7,000 joint ventures in Russia that involve foreign capital, one third of the participants are from Asian-Pacific countries. In turn, Russian capital participates in about 500 joint ventures with Asian-Pacific countries. In Siberia and the Far East alone there are more than 1,000 joint ventures, most of which are concentrated in the exploration of the natural resources of these vast territories containing 50 percent of the world's coal and natural gas, 25 percent of the world's oil, and enormous amounts of other raw materials.

We think that the Asian-Pacific states could provide big investments in the Russian economy. A good example is the creation, with the participation of Japan and South Korea, of an international communications system complex in the Far East. Another multilateral economic cooperation project-the Tumangan project at the junction of Russia, China, and North Korea-also has good prospects. Russia can supply the Asian-Pacific countries with many types of complete equipment as well as with modern technologies.

In 1994-95, Russia and China made an important step in their relationship-they decided to have a long-term, good-neighbor relationship without the ideological extremities of the past and build a firm base of partnership, aimed at the 21st century. The new quality of our relations with China allowed us to reach several large-scale agreements such as the nontargeting of strategic nuclear missiles, the prevention of dangerous military activities, and agreement on the western border. As a result, the foreign policy environment for the development of the Far East is dramatically improved. Of course we still have some difficult problems with China, such as border relations and exchanges, but we agreed with China to deal with them jointly.

The breakthrough in our relationship with China consolidates Russia's overall security and position in the world in general. Russia will continue to develop military-technology with China while observing certain principles including considerations of our own security; strict observance of our international obligations, particularly in the area of nonproliferation; the existing balance of forces in the region; and the transparency of such cooperation. Russia and China will expand their cooperation in international affairs in the Asian-Pacific region.

Russia will continue to develop its relationship with Japan, with the intent to raise it to the level of a true partnership, based on the decisions of the Russian-Japanese summit in October 1993 and the Tokyo Declaration. Russia and Japan are deepening mutual understanding, expanding their political dialogue, and developing contacts in trade as well as in science and technology. It is necessary to continue development of ties with Japan in all areas that will facilitate the settlement of the most difficult problems, including the problem of the peace treaty. In this regard it is important to overcome, by practical deeds, the current gap between the today's bilateral cooperation and the great potential of the two countries.

Russia will continue to consolidate relations with the United States by the creation of new collective structures that contribute to the buildup of confidence and stability in the Asian-Pacific region. Russia and the United States may play a very important, positive role by helping to prevent confrontations in the area and to help other countries to solve existing conflicts. At the same time, Russia cannot agree with any attempts by any country to diminish Russia's role in the region or to limit its influence on the topical issues in the area.

It is very important that Russia, the United States, China, Japan, and other countries of the region use the unique situation presented with the end of the Cold War to build new security systems in the Asia and Pacific region that will accommodate all new power centers. As Russia has stabilized and developed relationships with traditional, we can note with satisfaction the positive tendencies in the relationships with ASEAN countries. Taking into consideration the geographical proximity of Russia and Korea, as well as their close ties in the past, it is quite natural that situation on the Korean peninsula attracts constant attention in Moscow. The Korean peninsula is located at the center of the strategically important Far Eastern region. The main goals of Russian policy on the Korean peninsula are:

A nuclear-free peninsula

Reduction of military and political confrontation

Productive dialogue between the two Korean states leading to the development of cooperation between them

Ultimately, the reunification of Korea by peaceful means.

Aimed at a constructive and mutually complementary partnership with the Republic of Korea and, at the same time, good-neighbor relations with the Democratic People's Republic of Korea, Russia will not develop our relations with one Korean state at the expense of the other. Russia is ready to facilitate the achievement of the ultimate goal of peaceful reunification.

The North Korean nuclear problem is one of the most urgent problems that face the international community. Its solution may lead to the improvement of the inter-Korean relationships as well as normalization of North Korean ties with the United States and other Western countries. Russia's primary concern is a nuclear-free Korean Peninsula. Based on this position we welcomed the signing on October 21, 1994, of the Geneva USA-DPRK framework agreement as a step in the right direction, as well as subsequent agreements between the Korean Energy Development Organization (KEDO) and the DPRK, despite the fact that we saw in them certain elements that need to watched carefully, such as nonproliferation.

Taking all these considerations into account Russia reconfirms its readiness to contribute to the solution of the problem. We would be ready to join KEDO if Russia can secure an important role in it and if the interests of our atomic industry will be taken into account. We are expecting concrete proposals in this regard.

Russia consistently stands for the resumption of inter-Korean dialogue leading to normalization on the Korean peninsula as the optimal way to settle the relationship between North and South. Other countries can contribute to this by creating favorable conditions for inter-Korean agreements, facilitating them, and, if necessary, guaranteeing them.

In our opinion, using a position of strength toward North Korea is counterproductive as this approach gives additional credence to those in the DPRK who stand for a cautious or even negative approach toward dialogue. Various multilevel contacts including nongovernmental contacts are much more productive. We are convinced that economic cooperation with the DPRK is much more advantageous to everyone than the present economic isolation and possible sudden collapse of the North Korean regime. We intend to do everything possible to help create an atmosphere of confidence between the DPRK and the ROK. We are also ready to assist in solving concrete problems.

With the establishment 5 years ago of diplomatic relations, the Russian Federation and the ROK moved from mutual enmity to cooperation in political, economic, cultural and many other spheres based upon common values of freedom, democracy, rule of law, respect of human rights, and establishment of a market economy. Based on the Treaty of Basic Relations (1992) and the Joint Declaration signed during Moscow Summit in 1994, we are witnessing a high level of cooperation and confidence as well as regular political dialogue at all levels. Russia actively supports a ROK bid for U.N. Security Council membership. Russia sees additional possibilities for close consultations and dialogue with the ROK such as regional issues, cooperation at the United Nations and within Asia's security forums, including ARF, North-East Asia dialogue, and others. We concur and value the ROK position that Korean peninsula issues can be solved with the participation of other interested countries including Russia.

Russia is building its relationship with the DPRK on the principles of respect of sovereignty and noninterference into infernal affairs of each other. We want a, good-neighbor relationship with North Korea not directed against any third country.

The July 6, 1961, Treaty on Friendship, Cooperation and Mutual Assistance between the USSR and the DPKR has played an important role in bilateral relations and in keeping peace and security on the Korean peninsula. However, the Treaty was concluded in an absolutely different situation and has now become obsolete. Many provisions of the Treaty no longer fit with the new realities in Russia, Russian-Korean relations, and North East Asia. As a result of this new environment, Russia drafted a new treaty in August 1995, the Treaty on Basic Friendly Relations, then submitted it to North Korea for consideration. North Korea continues to examine the draft treaty.

The Koreans' aspiration to reunify their motherland in a peaceful and democratic way is deeply understood in Russia. Together with other nations, Russia is doing everything possible to remove obstacles in the way of inter-Korean rapprochement and reunification and are ready to participate in all actions leading to this end. For Russia, the unification of Korea will have many advantages. Most importantly, the long-standing hotbed of tension near the Russian border will be eliminated and the situation in North East Asia as a whole will be improved. Unified Korea, with its big economic and human resources, can become an essential factor in determining the political and economic situation in this region. Economically, a unified Korea will provide Russia with a reliable partner for cooperation with our Siberia and Far East regions.

Unfortunately, no one can predict with any certainty when and how Korea will be unified. Our interest is that this process takes place according to the will of all the Korean people and that the process will be peaceful.

One must admit that the existing peace structure, based on Armistice Agreement of 1953, has become obsolete and needs to be replaced. It no longer corresponds to contemporary realities in and around Korea. Replacement of the old process must be done cautiously, however, because the Armistice Agreement is the only internationally acknowledged document ensuring peace on the Korean Peninsula. The Agreement should be observed by all its participants in spirit and letter until a new peace structure conducive to the interests of all sides involved is worked out.

The Korean problems are international, and many states, including Russia, are interested in solving them. That is why we proposed last year to convene an international conference for integrated discussions of Korean problems including the non-nuclear status of the Korean peninsula and a new peacekeeping system.

The conference would consider measures of confidence on the Korean Peninsula and improvement of North-South relations. It would discuss the way to promote an implementation of the Agreement between South and North on Reconciliation, Nonaggression, Cooperation, and Exchanges, as well as develop measures to eliminate military and political confrontation on the Korean peninsula, implement confidence-building measures in the military, prevent armed incidents, and reduce military forces and armaments.

Taking into consideration the interlacing interest of countries involved, such a conference might be the best method to settle the Korean problems without infringing on the interests of any side. We are confident that sooner or later the time will come for such an international forum on the Korean peninsula.

For the first time in many years Russia is able to ensure both normal good-neighbor and, wherever possible, partner relationships with all major powers of this vast region. It is possible to guarantee the security of our eastern borders, to improve foreign policy conditions for the development of the Far Eastern regions, and to consolidate the overall international position of Russia. At the same time, Russia has the potential to play an even larger role with the East. This is why it is important to have an even more active policy and diplomacy in the Asian-Pacific region.

Undoubtedly, current internal economic and political difficulties in Russia will be overcome, and Russia will inevitably rise as a major global and Eurasian power. It is very important that it fit well into the currently forming Pacific community. The only way to ensure this is to construct this community together, with Russia taking into consideration legitimate Russian interests in the region. All opportunities for this exist now and should not be missed.